Introduction to Gold Prices
Gold prices are expected to reach new peaks, driven by potential US Federal Reserve rate cuts, ongoing central bank acquisitions, and increased ETF investments, according to ING Group. The bank has revised upwards its forecast for gold prices this year as the precious metal remains in demand. Gold has emerged as a top-performing major commodity this year, with its value increasing by over 25%. The surge is attributed to several factors, including US President Donald Trump’s assertive trade policies, ongoing conflicts in the Middle East and Ukraine, and significant purchases by central banks.
Forecasts and Rate Cuts
Gold experienced most of its gains in the first four months of the year, reaching a record high of over $3,500 per ounce in April. Since then, it has traded within a narrow range and has not surpassed that level again. However, with US rate cuts bets intensifying, gold could be poised for another fresh record high, according to ING. A potential catalyst to reignite a record-breaking rally could be a rate cut by the Federal Reserve. ING now expects gold prices to average $3,400 per ounce in the third quarter of this year compared with an earlier forecast of $3,250 an ounce. In the fourth quarter, the agency sees gold averaging $3,450 an ounce against its previous forecast of $3,200 per ounce.
Rate Cut Speculation
Expectations are high for a US central bank interest rate cut next month, with traders assigning a 93% probability. This follows a disappointing jobs report last week, contributing to a deteriorating outlook for both US growth and inflation. ING economists now expect three cuts for the rest of this year and another two in early 2026, which is more aggressive than markets are pricing. Gold’s allure as a safe haven is also being bolstered by the impending actions of the Fed committee. Trump may have the chance to appoint a successor who aligns with his rate-cutting goals, following Federal Reserve Governor Adriana Kugler’s resignation earlier this week.
Central Bank Purchases
Another key driver of gold’s rally, central bank buying, remains solid. Global official gold reserves saw an increase of 166 tonnes in the second quarter of this year, according to World Gold Council data. The National Bank of Poland was the leading buyer, adding 19 tonnes to its gold reserves in Q2, though this was less than the 49 tonnes purchased in Q1. Poland’s official gold holdings now stand at 515 tonnes, constituting 22% of its total reserves. Second-quarter gold buying saw a 33% decline quarter-on-quarter, marking the second consecutive quarter of slowing demand.
China Demand and ETF Inflows
The People’s Bank of China continued its gold acquisition trend in July, marking the ninth consecutive month of increased gold reserves. The central bank’s gold holdings rose by 60,000 troy ounces to a total of 73.96 million troy ounces last month. According to WGC data, gold-backed ETFs experienced a significant surge in investment during the second quarter, resulting in a net increase of 170 tonnes in global holdings. This strong demand in April and June successfully offset a minor decline observed in May. ETFs experienced a robust first half of the year, with a significant increase of 397 tonnes in global holdings.
Conclusion
In conclusion, gold prices are expected to continue their upward trend, driven by a combination of factors including potential US Federal Reserve rate cuts, ongoing central bank acquisitions, and increased ETF investments. With expectations high for a US central bank interest rate cut next month and central banks continuing to add gold to their reserves, gold’s allure as a safe haven is likely to remain strong. As the global economic environment remains uncertain, investors are likely to continue seeking safe-haven assets, driving gold prices to new peaks.
